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Friday, May 25, 2012

The National Bank of Dad is Now Open for Business

Jada's been pestering me for an allowance. There's lots of stuff she wants to buy, and she's quickly realized we're not going to buy it for her, so she wants to take matters into her own hands. Well, I suppose it's time. The National Bank of Dad is now open for business.

I was exposed to money management at an early age, and perhaps not coincidentally, ended up learning accounting in high school, winning a national competition in FBLA, majoring in accounting in college, and using spreadsheets for a living. I'm not necessarily hoping Jada will follow in my footsteps, but I do think that learning how money works, how to keep track of it, and how to choose between spending it, saving it, and giving it away are important life lessons. So this weekend, we're initiating an allowance for her.

On my bus ride home last night, I jotted down some thoughts which I then typed up at home and will go over with Jada tomorrow. I welcome your feedback. A few notes:

(1) Note the interest rate. On an annual basis, that's an interest rate of 14,100%! Let's see the banks match that. And yet it will likely not induce additional savings on Jada's part.

(2) We're not doing hard cash in jars. Everything's on paper. That's how the world works, that's what she's going to learn.

(3) While we will use the opportunity to teach about the importance of saving and giving, how the money gets used will be solely up to Jada. It's the only way to learn.

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Jada’s Allowance Rules

Things I Will Learn From Having an Allowance

·How money works

·How to keep track of my money

·How to choose between spending, saving, and
giving away

Ways I Can Make or Lose Money

·Plus 10 cents for each weekend chore I do

·Minus 10 cents for each weekend chore I do not
do

·Plus 1 dollar bonus if I do every single weekend
chore

·Plus 10 cents each day I put away all of my
things when I come home

·Minus 10 cents each day I don’t put away all of
my things when I come home

·Plus 1 dollar bonus if I put away all of my
things when I come home for the whole week

·Plus 1 dollar bonus each week if I do my ledger
right

·Plus more money for extra chores that Mommy and
Daddy give me

·Plus more money if I find it or if someone gives
it to me

Things I Have to Do to Keep Track of My Money

·Daddy will give me a ledger

·I have to keep track of money coming in and
money going out

·I am allowed to use a calculator

Earning Interest

·At the end of every week, after I have recorded
my money coming in and my money going out, I will earn interest on the money I
have